What is Making Tax Digital?
Answered 11 March 2026
Making Tax Digital (MTD) is a government initiative to modernise the UK tax system by requiring businesses and individuals to keep digital records and submit tax information to HMRC using compatible software, replacing traditional paper-based and annual self-assessment processes.
HMRC Guidance / Practice
Origins and Purpose
In the March 2015 Budget, the government announced its vision for modernising the tax system "in order to make it easier for individuals and businesses to get their tax right and keep on top of their affairs, meaning an alternative to the Self-Assessment tax return system."
Two Main Pillars of MTD
MTD currently operates across two key taxes:
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MTD for VAT: Rules introduced under the MTD initiative mean that all VAT-registered businesses must keep digital records and submit VAT Returns to HMRC using compatible software. All VAT-registered businesses are now automatically signed up by HMRC unless exempt.
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MTD for Income Tax: Legislation requires digital record keeping, at least 3 monthly updates of summary income and expenses, and an annual declaration, for most self-employed businesses and landlords. Under MTD for Income Tax, taxpayers (or their agents) must:
- Create, store and correct digital records of self-employment and property income and expenses
- Send quarterly updates to HMRC
- Submit a tax return and pay tax due by 31 January the following year
Software Requirement
Customers must use third-party compatible software to keep their business records digitally and to submit their business updates to HMRC.
What the Law Says
The Income Tax (Digital Requirements) Regulations 2021 (as amended in 2024, coming into force on 6 April 2026) set out the legal framework for MTD for Income Tax. A "relevant person" must:
- Use functional compatible software to keep and preserve digital records, provide quarterly updates, and make corrections to digital records
- Keep digital records for each business from the digital start date until the business ceases
- Provide quarterly updates to HMRC containing financial information (income and expenses) for each quarterly update period in each tax year
In summary, Making Tax Digital is HMRC's programme to digitise tax record-keeping and reporting, currently mandatory for VAT-registered businesses (MTD for VAT) and being extended to income tax for self-employed individuals and landlords (MTD for Income Tax, from April 2026).
Citation sources
All VAT registered businesses should now be signed up for Making Tax Digital for VAT. You no longer need to sign up yourself. HMRC will sign up all new VAT registered businesses to Making Tax Digital for VAT automatically unless they are already exempt or have applied for exemption. You should now keep VAT records and submit VAT Returns using compatible software. Find software that’s compatible with Making Tax Digital for VAT.
Rules introduced under the Making Tax Digital initiative mean that all VAT registered businesses need to keep digital records and submit VAT Returns to HMRC using compatible software. This notice: explains the digital records businesses must keep, and ways to record transactions digitally in certain special circumstances explains what counts as compatible software, and when software programs do and do not need to be digitally linked where a combination of programs is used gives examples of when
When authorised, your agent can: sign you up for Making Tax Digital for Income Tax create, store and correct digital records of your self-employment and property income and expenses send your quarterly updates to HMRC submit your tax return and pay tax due by 31 January the following year Find out more about Making Tax Digital for Income Tax.
PART 1 General Citation and commencement 1 These Regulations may be cited as the Income Tax (Digital Requirements) Regulations 2021 and come into force on 6th April 2026 . Interpretation 2 In these Regulations— “TMA 1970” means the Taxes Management Act 1970; “Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs; ... “digital records” has the meaning given by regulation 6; “the digital requirements” has the meaning given by regulation 3(1); “digital start date” has the mea
that business. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The digital start date that applies to the business is 6th April in the year of assessment following the year of assessment in which the person was required to deliver the return. PART 2 Digital records Keeping and recording digital records 5 1 A relevant person must keep digital records for each business for the period beginning with the digital st
In the March 2015 Budget the government announced its vision for modernising the tax system in order to make it easier for individuals and businesses to get their tax right and keep on top of their affairs, meaning an alternative to the Self-Assessment tax return system. Changes were introduced gradually from April 2017 ahead of legislative changes introduced from April 2018 for businesses and landlords with a turnover exceeding the VAT registration threshold and from April 2019 for those with a